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Volatility will last to the end of the year, says F&C

F&C Investments says that although the worst is over, the financial markets will be volatile for the rest of 2007 and there will be some high profile problems in individual companies, sectors and markets.

F&C Investments head of global equities Jeremy Tigue says the last week has been marked by two significant events.

He says: “The first was the run on Northern Rock, a top five UK mortgage lender, and the response from the UK’s Chancellor of the Exchequer, effectively guaranteeing all retail deposits in UK banks. This unprecedented intervention should underpin Northern Rock and start to create calmer conditions in UK credit markets.

“The second was the 50 basis point cut in the US Federal Funds rate and discount rate yesterday. This was greater than expected and was clearly designed to send a signal to markets that the US central bank, like the Bank of England, would do whatever it takes to prevent problems in the credit markets spreading to the ‘real’ economy.”

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